Here is why I think QE2 is a bad idea

老黄

There are many talks on the internet with numbers and charts. I have only common sense. Let me know what you think！

Here is why I think QE2 is a bad idea and additional stimulus might be a better alternative if needed. First, we should agree that job recovery is the key of the economy recovery. In my opinion, only FORESEEABLE STEADY corp profit will give companies the incentive to hire. How can QE2 achieve that? Given the interest rate at the short end is pratically zero, the outcome of QE2 is mostly depreciating dollar and arguably lower the rate at the long end. Quickly picking up inflation expectation will soon become a resistence for the long end rate to go lower. Besides, the rate at 30yr is already below 4% adn 10yr is around 2%。 How low can it go? We know the price at the consumer end won't go up near term, but raw materials such metals, energy have already run up a long way as the dollar depreicate. That means margin will be squeezed, earnings will be down. Will QE2 give CEOs confidence on the economy? Hell no! If I were one of them, I'd ask 1) does QE2 indicating that we are going to have tough time ahead? 2) what happens when all the QEs are to be unwind? 3) how will FX volatility affect international trade, trade wars?

Though a slowly depreciating dollar will help with US export, a quick move of dollar during a global recession like this will create pressure allover the world. With no one feel safe, who will open their wallet for US goods? Strong Yen is pushing Japan to the edge of a rollover. Strong Yuan could close thousands of factories in China. Will they buy US product when they are in pain? I doubt it. Middle east, Australia, Brazil are the ones may help.

Well if you say the picture wasn't that gloomy, we were already back on track, then my question is why the hack talking about QE2 now.


One more thing. I support helicopter money, but QE2 is nothing of that.

lite1067

There are many talks on the internet with numbers and charts. I have only common sense. Let me know  ...
老黄 发表于 2010-10-8 19:56

No one in Fed cares about how you or economists think... QE2 is 90% motivated by political agenda.

Diver

dommy

ding!

dsp

olderfrog

the QE2 is better remaining a possibility than being reality.

lionking819

"QE2 is 90% motivated by political agenda"
that is the tricky part. the election is done before Fed's meeting, if we aasume QE2 try to help
Dem, when the result come out, no matter Dem win or lose, the QE2 will lose its political purpose.

n748

Agreed. However, I am also fully aware of the fact that the market wants to go up no matter what.

To me, some evil forces are playing with it. It's out of control right now.

X!nG

向老黄学习！

328

ding